FIRST AMENDMENT TO AGREEMENT RELATING TO RETENTION AND NONCOMPETITION AND OTHER COVENANTS
Exhibit
10.2
FIRST
AMENDMENT TO AGREEMENT RELATING TO RETENTION AND
NONCOMPETITION
AND OTHER COVENANTS
First Amendment (the “First Amendment”), dated as of March
23, 2010 (the “Effective Date”),
to Agreement Relating to Retention and Noncompetition and Other Covenants by and
between Lazard Group LLC, a Delaware limited liability company, and successor to
Lazard LLC (“Lazard”), on its
behalf and on behalf of its subsidiaries and affiliates (collectively with
Lazard, and its and their predecessors and successors, the “Firm”), and Xxxxxxxxx X. Xxxxx
(the “Executive”), dated as of
October 4, 2004 (the “Agreement”); and
WHEREAS, the Firm and the Executive
wish to amend the Agreement to (i) make Lazard Ltd, a company incorporated under
the laws of Bermuda (“PubliCo”),
a party to the Agreement, as amended by the First Amendment, through PubliCo’s
execution of the First Amendment, and (ii) modify Schedule I to such Agreement
to, among other things, reflect the Executive’s appointment as Chief Operating
Officer of Lazard and PubliCo and to revise certain terms of the Agreement in
order to be consistent with agreements with other executive officers of Lazard
and PubliCo.
NOW, THEREFORE, in consideration of the
premises contained herein and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Executive, Lazard and
PubliCo hereby agree as follows:
Effective as of the Effective Date,
PubliCo shall become a party to the Agreement and Schedule I of the Agreement
shall hereby be amended and restated in the form attached hereto.
IN WITNESS WHEREOF, the Executive and
the Board of Directors of each of Lazard and PubliCo have caused this First
Amendment to be executed and delivered on the date first above
written.
March 23,
2010
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by
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| /s/ Xxxxxxxxx X. Xxxxx | |
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Xxxxxxxxx
X. Xxxxx
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March 23,
2010
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(on
its behalf, and on behalf of its
subsidiaries
and affiliates)
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by
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| /s/ Xxxxxxx X. Xxxxxx | ||
| Name: |
Xxxxxxx
X. Xxxxxx
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| Title: |
Chairman
and Chief Executive Officer
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March 23,
2010
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LAZARD
LTD,
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by
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| /s/ Xxxxxxx X. Xxxxxx | ||
| Name: |
Xxxxxxx
X. Xxxxxx
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| Title: |
Chairman
and Chief Executive Officer
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2
SCHEDULE
I
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Name
(as per Preamble):
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Xx.
Xxxxxxxxx X. Xxxxx
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Effective upon the effective date of
the First Amendment to this Agreement (the “First Amendment Effective
Date”), this Schedule I shall take effect and its provisions shall
constitute binding and enforceable agreements of the Firm.
1. Title. Notwithstanding
anything to the contrary contained in Section 3(b) of this Agreement, from the
First Amendment Effective Date through the third anniversary thereof, the
Executive shall serve as Chief Operating Officer of Lazard Group LLC and
PubliCo.
2. Compensation. Notwithstanding
anything to the contrary contained in Sections 3(c)(i) and (ii) of this
Agreement, subject to the Executive’s continued employment with the Firm during
the period from the First Amendment Effective Date through the third anniversary
thereof, the Executive shall be entitled to receive (i) an annual base salary of
not less than $750,000 (“Base Salary”) and
(ii) so long as the Executive remains employed by the Firm through the end of
the applicable fiscal year of Lazard, an annual bonus to be determined under the
terms of the applicable annual bonus plan of Lazard on the same basis as annual
bonus is determined for other executive officers of PubliCo, with such bonus to
be paid in the same ratio of cash to equity awards as is applicable to
executives of the Firm receiving bonuses at a level comparable to the bonus of
the Executive. For purposes hereof, the term Base Salary shall refer
to Base Salary as in effect from time to time, including any
increases. Notwithstanding anything to the contrary contained in
Section 3(c)(iv) of this Agreement, during the portion of the Term commencing on
the First Amendment Effective Date, subject to the Executive’s continued
employment, the Executive shall be eligible to participate in the employee
retirement and welfare benefit plans and programs of the type made available to
the senior most executives of the Firm generally, in accordance with their terms
and as such plans and programs may be in effect from time to time, including,
without limitation, savings, profit-sharing and other retirement plans or
programs, 401(k), medical, dental, flexible spending account, hospitalization,
short-term and long-term disability and life insurance plans.
3. Severance Pay and Benefits
under Certain Circumstances. Notwithstanding anything to the
contrary contained in Section 3(d) of this Agreement, in the event that during
the period commencing on the First Amendment Effective Date and concluding on
the third anniversary thereof, the Executive’s employment with the Firm is
terminated by the Firm without Cause or by the Executive for Good Reason (in
each case, as defined below) (a “Qualifying
Termination”), Lazard shall pay the Executive, in a lump sum in cash
within thirty (30) days after the Date of Termination, the aggregate of the
following amounts: (i) any unpaid Base Salary through the Date of Termination;
(ii) any earned and unpaid cash bonus amounts for fiscal years of Lazard
completed prior to the Date of Termination (determined in accordance with
paragraph 2 above and with any such bonus to be paid in full in cash); and (iii)
the product of (1) the “Severance Multiple”
(as defined below) and (2) the sum of (x) the Base Salary and (y) the average annual bonus
(or, to the extent applicable, cash distributions, and including any bonuses
paid in the form of equity awards based on the grant date value of such equity
awards in accordance with the normal valuation methodology used by Lazard) paid
or payable to the Executive for the two completed fiscal years of Lazard
immediately preceding the fiscal year during which occurs the Date of
Termination (the “Average
Bonus”). In addition, (i) for a period of months equal to the
product of (1) 12 and (2) the Severance Multiple, the Executive and his
eligible dependents shall continue to be eligible to participate in the medical
and dental benefit plans of Lazard on the same basis as the Executive
participated in such plans immediately prior to the Date of Termination, to the
extent that the applicable plan permits such continued participation for all or
any portion of such period (it being agreed that Lazard will use its reasonable
efforts to cause such continued coverage to be permitted under the applicable
plan for the entire period), which benefits continuation period shall not run
concurrently with or reduce the Executive’s right to continued coverage under
COBRA and (ii) to the extent permitted under the applicable plan, the Executive
will receive additional years of age and service credit equal to the Severance
Multiple for purposes of determining his eligibility for and right to commence
receiving benefits under the retiree health care benefit plans of Lazard
Group. For purposes of the provision of the health care benefits as
provided above, the amount of such health care benefits provided in any given
calendar year shall not affect the amount of such benefits provided in any other
calendar year, and the Executive’s right to the health care benefits may not be
liquidated or exchanged for any other benefit.
3
In addition, in the case of a
Qualifying Termination, with respect to the fiscal year of Lazard during which
the Date of Termination occurs, the Executive shall receive a pro-rata annual
bonus payable in cash determined as follows:
(i) if (A) the Date of Termination
occurs prior to or on the third anniversary of the First Amendment Effective
Date and (B) with respect to the fiscal year during which the Date of
Termination occurs, (1) the Executive was reasonably expected by Lazard to be a
“covered employee” (within the meaning of Section 162(m) of the Internal Revenue
Code of 1986, as amended (the “Code”)) prior to his Date of
Termination, and (2) the annual bonus that the Executive was eligible to receive
for such year was originally intended by Lazard to satisfy the performance-based
exception under Section 162(m) of the Code (without regard to any entitlement to
payment upon termination of employment), the Executive’s pro-rata annual bonus
shall equal the product of (1) the amount determined by the Compensation
Committee based on the Firm’s actual performance for the fiscal year of the Firm
in which the Date of Termination occurs on the same basis as annual bonus is
determined for other executive officers of the Firm (which, subject to the
limits on any such bonus due to the level of satisfaction of the performance
goals previously established for purposes of Section 162(m) of the Code, shall
not represent (on an annualized basis) a percentage of the Executive’s bonus for
the fiscal year preceding the fiscal year in which the Date of Termination
occurs that is lower than the average corresponding percentage applicable to
active executives of Lazard who received bonuses for such prior fiscal year in
amounts within 5% of the Executive’s bonus for such prior fiscal year), and (2)
a fraction, the numerator of which is the number of days elapsed in the fiscal
year of Lazard in which occurs the Date of Termination through the Date of
Termination, and the denominator of which is 365 (the “Pro-Ration Fraction”); or
4
(ii) if (A) the Date of Termination
occurs prior to or on the third anniversary of the First Amendment Effective
Date and (B) with respect to the fiscal year during which the Date of
Termination occurs, the Executive is not reasonably expected by Lazard to be a
“covered employee” (within the meaning of Section 162(m) of the Code) prior to
his Date of Termination, the pro-rata annual bonus shall equal the product of
(1) the Average Bonus and (2) the Pro-Ration Fraction.
The pro-rata annual bonus determined
pursuant to clause (i) or (ii) above, as applicable, shall be paid at such time
or times as Lazard otherwise makes incentive payments for such fiscal year (and
in all events prior to March 15 of the year following the year in which the Date
of Termination occurs).
For all purposes of this Agreement,
including without limitation, Sections 2(g)(ii) and Section 5(a), a resignation
on or prior to the third anniversary of the First Amendment Effective Date by
the Executive for Good Reason shall be treated as a termination of the Executive
by the Firm without Cause.
In no event shall the Executive be
obligated to seek other employment or take any other action by way of mitigation
of the amounts payable to the Executive under any of the provisions of this
paragraph 3 of this Schedule and such amounts shall not be reduced whether or
not the Executive obtains other employment. Except as provided in
Section 16(f) of this Agreement, the Firm’s obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Firm may have against the
Executive.
4. Certain
Definitions. For purposes of the Agreement and this Schedule
I, as applicable, the following terms shall have the following
meanings:
Notwithstanding the definition of “Date
of Termination” set forth in Section 5 of the Agreement, for purposes of the
Agreement, including Section 5, and this Schedule I, “Date of Termination” shall
mean (i) if the Executive’s employment is terminated by the Firm for Cause,
the date of receipt of the notice of termination from the Firm or any later date
specified therein within 30 days of such notice, as the case may be,
(ii) if the Executive’s employment is terminated by the Firm other than for
Cause or Disability, the date on which the Firm notifies the Executive of such
termination, (iii) if the Executive’s employment is voluntarily terminated
by the Executive without Good Reason, the date as specified by the Executive in
the Notice of Termination, which date shall not be less than three months after
the Executive notifies the Firm of such termination, unless waived in writing by
the Firm, (iv) if the Executive’s employment is terminated by the Executive for
Good Reason, the earlier of (A) the last day of the cure period (assuming no
cure has occurred) and (B) the date Lazard formally notifies the Executive that
it does not intend to cure, unless Lazard and the Executive agree to a later
date, which shall in no event be later than 30 days following the first to occur
of the dates set forth in clauses (A) and (B) of this clause (iv), and
(v) if the Executive’s employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of the Executive
or the date on which the Executive’s employment due to Disability is effective
for purposes of the applicable long-term disability plan of the
Firm. The Firm and the Executive shall take all steps necessary
(including with regard to any post-termination services by the Executive) to
ensure that any termination of the Executive’s employment described in the
Agreement, including Schedule I, constitutes a “separation from service” within
the meaning of Section 409A of the Code, and notwithstanding anything contained
herein to the contrary, the date on which such separation from service takes
place shall be the “Date of Termination.”
5
Notwithstanding the definition of
“Cause” set forth in Section 2(g)(iv) of the Agreement, from and after the First
Amendment Effective Date, for all purposes of this Agreement, including Section
2(g)(iv) and this Schedule I, “Cause” shall
mean: (A) conviction of the Executive of, or a guilty or nolo contendere plea (or the
equivalent in a non-United States jurisdiction) by the Executive to, a felony
(or the equivalent in a non-United States jurisdiction), or of any other crime
that legally prohibits the Executive from working for the Firm; (B) breach by
the Executive of a regulatory rule that materially adversely affects the
Executive’s ability to perform his duties to the Firm; (C) willful and
deliberate failure on the part of the Executive (i) to perform his employment
duties in any material respect or (ii) to follow specific reasonable directions
received from the Firm, in each case following written notice to the Executive
of such failure and, if such failure is curable, the Executive’s failing to cure
such failure within a reasonable time (but in no event less than 30 days); or
(D) a breach of the Covenants that is (individually or combined with other such
breaches) demonstrably and materially injurious to Lazard or any of its
affiliates. Notwithstanding the foregoing, with respect to the events
described in clauses (B) and (C)(i) hereof, the Executive’s acts or failure to
act shall not constitute Cause to the extent taken (or not taken) based upon the
direct instructions of the Board of Directors of PubliCo.
“Good Reason” shall mean (i) the
assignment to the Executive of any duties inconsistent in any material respect
with the Executive’s position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as in effect as of the
First Amendment Effective Date, or any other action by the Firm which results in
a material diminution in such position, authority, duties or responsibilities
from the level in effect as of the First Amendment Effective Date, (ii) a
material breach by the Firm of the terms of this Agreement, including, without
limitation, any material failure by the Firm to comply with paragraph 2 of this
Schedule, or (iii) any requirement that the Executive’s principal place of
employment be relocated to a location that increases the Executive’s commute
from his primary residence by more than 30 miles. In the event of a
termination for Good Reason, the notice requirements of Section 1 shall not
apply. Notwithstanding the foregoing, a termination for Good Reason
shall not have occurred unless (i) the Executive gives written notice to Lazard
of termination of employment within ninety (90) days after the Executive first
becomes aware of the occurrence of the circumstances constituting Good Reason,
specifying in reasonable detail the circumstances constituting Good Reason, and
Lazard has failed within thirty (30) days after receipt of such notice to cure
the circumstances constituting Good Reason, and (ii) the Executive’s “separation
from service” (within the meaning of Section 409A of the Code) occurs no later
than two years following the initial existence of one or more of the
circumstances giving rise to Good Reason.
“Severance Multiple” shall equal (i)
two (2), if the Date of Termination occurs prior to a Change of Control or (ii)
three (3), if the Date of Termination occurs on or following the date of a
Change of Control.
6
5. Excise
Tax. In the event it shall be determined that any payment,
benefit, or distribution by the Firm to or for the benefit of the Executive
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise, but determined without regard to any additional
payments required under this paragraph) (a “Payment”) would be
subject to the excise tax imposed by Section 4999 of the Code or any interest or
penalties are incurred by the Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the “Excise Tax”), then
the Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in
an amount such that after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, but excluding
any income taxes and penalties imposed pursuant to Section 409A of the Code, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
The Firm’s obligation to make Gross-Up
Payments under this paragraph 5 shall not be conditioned upon the Executive’s
termination of employment. All determinations required to be made
under this paragraph, including whether and when a Gross-Up Payment is required
and the amount of such Gross-Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made by Deloitte & Touche LLP or
such other certified public accounting firm reasonably acceptable to the Firm as
may be designated by the Executive (the “Accounting Firm”), which shall provide
detailed supporting calculations both to Lazard and the Executive within fifteen
(15) business days of the receipt of notice from the Executive that there has
been a Payment, or such earlier time as is requested by Lazard. All
fees and expenses of the Accounting Firm shall be borne solely by the
Firm. Any Gross-Up Payment shall be paid by the Firm to the Executive
within five days of the later of (i) the due date for the payment of any Excise
Tax, and (ii) the receipt of the Accounting Firm’s determination. Any
determination by the Accounting Firm shall be binding upon the Firm and the
Executive. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Firm should have been made (“Underpayment”) or that Gross-Up
Payments which were made by the Firm should not have been made (“Overpayment”). In the event
that there occurs an Underpayment and the Executive thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Firm to or for the benefit of the Executive. In
the event that there occurs an Overpayment and the Executive becomes entitled to
receive any refund with respect to the Excise Tax, the Executive shall promptly
pay to the Firm the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto).
Any Gross-Up Payment, as determined
pursuant to this paragraph 5, shall be paid by the Firm to the Executive within
five (5) days of the receipt of the Accounting Firm’s determination; provided that, the Gross-Up Payment
shall in all events be paid no later than the end of the Executive’s taxable
year next following the Executive’s taxable year in which the Excise Tax (and
any income or other related taxes or interest or penalties thereon) on a Payment
is remitted to the Internal Revenue Service or any other applicable taxing
authority or, in the case of amounts relating to a claim from the Internal
Revenue Service or another tax authority that does not result in the remittance
of any federal, state, local and foreign income, excise, social security and
other taxes, the calendar year in which the claim is finally settled or
otherwise resolved. Notwithstanding any other provision of this
paragraph 5, the Firm may, in its sole discretion, withhold and pay over to the
Internal Revenue Service or any other applicable taxing authority, for the
benefit of the Executive, all or any portion of any Gross-Up Payment, and the
Executive hereby consents to such withholding.
7
6. Section
409A. It is the intention of the parties that the payments and
benefits to which the Executive could become entitled in connection with
termination of employment under this Agreement comply with or are exempt from
the definition of “nonqualified deferred compensation” under Section 409A of the
Code. In this regard, notwithstanding anything in this Agreement to
the contrary, all cash amounts that become payable under Section 3 of this
Schedule I on account of the Executive’s termination of employment shall be paid
no later than March 15 of the year following the year in which the Date of
Termination occurs. In the event the parties determine that the terms
of this Agreement, including this Schedule I, do not comply with Section 409A,
they will negotiate reasonably and in good faith to amend the terms of this
Agreement and/or Schedule I such that they comply (in a manner that attempts to
minimize the economic impact of such amendment on the Executive and the Firm)
within the time period permitted by the applicable Treasury
Regulations.
7. Miscellaneous.
Your HoldCo Interests (as per Section
2(b)) are 0.2500 and your Profit Interests (as per Section 2(d)) are
0.2500.
Section 5(a). Section 5(a)
of the Agreement is hereby amended and restated in its entirety to read as
follows: The Executive acknowledges and recognizes the highly
competitive nature of the businesses of the Firm. The Executive
further acknowledges and agrees that in connection with the Reorganization, and
in the course of the Executive’s subsequent employment with the Firm, the
Executive has been and shall be provided with access to sensitive and
proprietary information about the clients, prospective clients, knowledge
capital and business practices of the Firm, and has been and shall be provided
with the opportunity to develop relationships with clients, prospective clients,
consultants, employees, representatives and other agents of the Firm, and the
Executive further acknowledges that such proprietary information and
relationships are extremely valuable assets in which the Firm has invested and
shall continue to invest substantial time, effort and expense. As a
Managing Director and Class A Member of Lazard, the Executive is currently bound
by certain restrictive covenants, including a noncompetition restriction,
pursuant to the terms of the Goodwill Agreement. Accordingly, the
Executive hereby reaffirms and agrees that while employed by the Firm and
thereafter until (i) three months after the Executive’s date of termination of
employment for any reason other than a termination by the Firm without Cause or
(ii) one month after the date of the Executive’s termination by the Firm without
Cause (in either case, the date of termination, the “Date of Termination,” and such period,
the “Noncompete Restriction
Period”), the Executive shall not, directly or indirectly, on the
Executive’s behalf or on behalf of any other person, firm, corporation,
association or other entity, as an employee, director, advisor, partner,
consultant or otherwise, engage in a “Competing Activity,” or acquire or
maintain any ownership interest in, a “Competitive Enterprise.” For
purposes of this Agreement, (i) “Competing Activity” means the
providing of services or performance of activities for a Competitive Enterprise
in a line of business that is similar to any line of business to which the
Executive provided services to the Firm in a capacity that is similar to the
capacity in which the Executive acted for the Firm while employed by the Firm,
and (ii) “Competitive
Enterprise” shall mean a business (or business unit) that (A) engages in
any activity or (B) owns or controls a significant interest in any entity that
engages in any activity, that in either case, competes anywhere with any
activity in which the Firm is engaged up to and including the Executive’s Date
of Termination. Further, notwithstanding anything in this Section 5,
the Executive shall not be considered to be in violation of this Section 5
solely by reason of owning, directly or indirectly, any stock or other
securities of a Competitive Enterprise (or comparable interest, including a
voting or profit participation interest, in any such Competitive Enterprise) if
the Executive’s interest does not exceed 5% of the outstanding capital stock of
such Competitive Enterprise (or comparable interest, including a voting or
profit participation interest, in such Competitive Enterprise).
8
Section 6. Section 6 of the
Agreement is hereby amended to replace the definition of “Client” with the
following definition: “Client” means any client or
prospective client of the Firm, whether or not the Firm has been engaged by such
Client pursuant to a written agreement; provided that an entity which is not a
client of the Firm shall be considered a “prospective client” for purposes of
this sentence only if the Firm made a presentation or written proposal to such
entity during the 12-month period preceding the Date of Termination or was
preparing to make such a presentation or proposal at the time of the Date of
Termination.
Section 12. Section 12 of
this Agreement is hereby amended to replace all references to the New York Stock
Exchange, Inc.” and the “NYSE”
with references to the “Financial Industry Regulatory Authority” and “FINRA”, as applicable.
Section 16(b). Paragraphs
2, 3, 4, 5 and 6 of this Schedule I are hereby added to the list of Sections in
Section 16(b) of this Agreement.
Section 16(f). Section
16(f) of this Agreement is hereby amended to add the following words at the end
thereof: “except to the extent such withholding or offset is not
permitted under Section 409A of the Code without the imposition of additional
taxes or penalties on the Executive.”
| /s/ AFS |
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Initialed
by the Executive
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| /s/ KMJ |
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Initialed
by Lazard
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9
